Exxon’s billion-dollar Colorado oil shale gamble revisited

When the boom went bust on Black Sunday, May 2, 1982, panic seized the Western Slope. The First National Bank of Rifle went under. Depositors lined up around the block to try and retrieve their money.

Photo courtesy of Andrew Gulliford

When the boom went bust on Black Sunday, May 2, 1982, panic seized the Western Slope. The First National Bank of Rifle went under. Depositors lined up around the block to try and retrieve their money.

GRAND JUNCTION – I’ll confess that I’m an environmentalist, an earth muffin. So what was I doing having drinks and dinner at the DoubleTree Hotel in Grand Junction with retired executives from Exxon-Mobil, the largest oil company in the world?

Exxon and I go way back. Our fates are intertwined. In the early 1980s when Exxon jumped into developing oil shale I was teaching fourth grade in Silt.

The oil shale boom was amazing. The largest corporation in the world decided to create an 8 million-barrel-per-day industry by 2010. Thousands of workers poured into the Colorado River Valley from the depressed Midwest and South.

Beginning in 1980, the local economy roared with Exxon spending a million dollars a day in a valley 60 miles long and 20 miles wide. That was like driving a dump truck full of $100 bills through small towns and leaving the tailgate open. It was boomtown euphoria.

Everyone had work. Everyone was busy. Because of limited housing, Exxon established “man camps” up Parachute Creek for workers on round-the-clock shifts. Pastors scrambled to build new churches. Prostitutes arrived from Denver to ply their trade out of Volkswagen buses. Even Danny the Bum made spare change sweeping Parachute’s streets.

It was a free-for-all with a rush to build new schools, add on to hospitals, pave streets, erect town halls, hire deputies, plat subdivisions, recruit teachers and, on 2,300 acres across the Colorado River from Parachute, build an entirely new town called Battlement Mesa complete with a golf course, shopping mall and housing from trailers to executive homes on the 18th hole.

We were a bright spot in the nation’s economy. Exxon promised its workers years of employment. Executives arrived from Texas in tailored jeans, hand-tooled boots, broad smiles and firm grips.

“We’re from Houston, and we’re here to help you,” they said.

County commissioners smiled back. Everyone trotted out their wish lists for new infrastructure, libraries, services. The future couldn’t have looked better, though perhaps not for the environment. Exxon projected 1.5 million people living on the Western Slope, and air quality diminished to a Denver haze. A professor called it “voodoo economics.”

Then on Sunday, May 2, 1982, it all went “pop.” The boom busted. Exxon’s board of directors frowned at the declining price of oil and pulled the plug. Jerked the rug. Left the valley in shock.

I lived through all that. I watched my friends lose their jobs, their houses and, finally, their marriages. The president of First National Bank in Grand Junction shot himself. First National Bank in Rifle closed because so many people demanded their money. Desperate depositors lined the block.

Businesses that had survived the Great Depression in the 1930s failed after Exxon’s pullout. Overnight, 2,300 people lost their jobs. Within a week, there were no U-Haul trailers within 100 miles. By summer’s end, 5,000 people deserted the valley and over the next few years, 15,000 people would become Colorado exiles. My wife and I left, too.

We went to graduate school and there, 1,200 miles away, I wrote my doctoral dissertation on the history of oil shale development. Boomtown Blues: Colorado Oil Shale won the Colorado Book Award. Business Week wrote: “The havoc that shale hysteria wreaked on the small towns that dot the expanses of Western Colorado is the subject of Boomtown Blues. ... Gulliford frames the tale as a morality play in which the villain is played by Exxon. ... (T)he book is more than colorful history. It is a warning we would do well to heed.”

So what was I doing last month drinking Texas Shiner Bock beer with 32 Exxon retirees and their spouses? Trying to learn what had happened to them, to put a face on a corporation.

In 2010, retirees who had worked on the Colony Oil Shale Project and Battlement Mesa staged a 30-year reunion to commemorate the project’s beginning. Now, in May 2012, they came together to remember the bust.

I received an email invitation from Rhonda Atchee, then executive secretary to Charles Pence, the man who had taken sagebrush and hay meadows near Parachute and created a new town. What the hell, I thought. Why not? I’m a historian. I should go. I might learn something. And I did.

I’d already learned that Exxon had misled county commissioners in Mesa, Garfield and Rio Blanco counties by painting a rosy picture of massive oil shale development while the company itself had secret 30-day shutdown clauses so that it could get out of multimillion-dollar construction contracts. Commissioners assumed Exxon meant what it publicly proposed.

“Life’s funny and deals you different cards,” said the now-silver-haired Pence, former president of Battlement Mesa Inc., a wholly owned subsidiary of Exxon. He cautioned, “You have to stop and look all the way through the bust. The oil company thought about the shareholders. A company like that can’t accommodate a small group of people.”

Bob Skyles spent 29 years with Exxon and told me, “When we came here in 1981, we thought this was to be our final assignment. We were heartbroken after the shutdown. Exxon came in here with both feet and they didn’t have their shoes on.”

I agree that corporate machismo had a lot to do with Exxon’s big, boisterous push for oil shale. Fortune magazine estimated that Exxon spent $720 million in less than two years. I learned that the total cost, with corporate transfers and the required reclamation work, probably was $1 billion.

Employees felt numb by the shutdown – just as locals did. A few former workers long to retire in Colorado. Some couples already have.

“Even though the project failed, the esprit de corps continues to this day,” said engineer Larry Hayes, who was in charge of the oil shale mine.

He’s written a privately printed book titled Lost Colony: Exxon’s Bold Oil Shale Venture. Hayes explains that working on the project was “one of the best times I’ve ever had. We lived in nine different states and three foreign countries, but we never had more fun than here.”

I was impressed by their allegiance to each other and their commitment to their careers, but I couldn’t help but think of all the local lives shattered by Exxon’s corporate hubris – the decade-long economic depression between Grand Junction and Rifle, the bankruptcies, the foreclosures, the failed marriages, the lost hopes. History isn’t just what we remember: It’s also what we choose to forget.

Oil shale is still there.

Thirty years ago, Fortune wrote that Exxon’s departure from oil shale “had all the abruptness of a teenager making a screeching U-turn.” Let’s not repeat past mistakes. Let’s wait for a proven technology that does not squander water, pollute the air and threaten wildlife and archaeological sites. The Old West was boom and bust. The Next West must embody environmentally and socially responsible energy development.

Imagine if in the 1980s Exxon’s board of directors had dedicated that same billion dollars to solar energy instead of squeezing rocks. Where would we be now?

The massive oil shale industry was projected to bring 1.5 million people to the Western Slope. Environmental impacts could have been disastrous. This sign, on a county road in the Piceance Creek Basin of Rio Blanco County, gives some idea of the impact on wildlife.

Photo courtesy of Andrew Gulliford

The massive oil shale industry was projected to bring 1.5 million people to the Western Slope. Environmental impacts could have been disastrous. This sign, on a county road in the Piceance Creek Basin of Rio Blanco County, gives some idea of the impact on wildlife.

Most small towns in the Colorado River valley built new town halls and libraries during the oil shale boom. The Parachute Town Hall features a large chunk of oil shale from the rich mahogany formation.

Photo courtesy of Andrew Gulliford

Most small towns in the Colorado River valley built new town halls and libraries during the oil shale boom. The Parachute Town Hall features a large chunk of oil shale from the rich mahogany formation.

So many construction workers moved to Parachute during the oil shale boom that Battlement Mesa, the new town built in Garfield County, included trailer parks as well as executive homes on the golf course.

Photo courtesy of Andrew Gulliford

So many construction workers moved to Parachute during the oil shale boom that Battlement Mesa, the new town built in Garfield County, included trailer parks as well as executive homes on the golf course.

Despite years of trying and two booms, one in the early 1920s and one in the early 1980s, no corporation has yet to extract oil from shale or kerogen and make it economically and environmentally viable. This is the experimental Union Oil Co.’s retort, which is designed to heat shale. Once shale is heated, however, it has “the popcorn effect” – it expands, and clogs pipes and hydraulic systems.

Photo courtesy of Andrew Gulliford

Despite years of trying and two booms, one in the early 1920s and one in the early 1980s, no corporation has yet to extract oil from shale or kerogen and make it economically and environmentally viable. This is the experimental Union Oil Co.’s retort, which is designed to heat shale. Once shale is heated, however, it has “the popcorn effect” – it expands, and clogs pipes and hydraulic systems.